30 Apr 2015 15:15
Annual Report and Accounts 2014
Avocet Mining PLC ("Avocet" or the "Company") has today published its Annual Report and Accounts for the year ended 31 December 2014 on its website - www.avocetmining.com
In compliance with LR9.6.1, a copy of the Annual Report and Accounts will shortly be available for inspection at the Financial Conduct Authority's National Storage Mechanism website: http://www.hemscott.com/nsm.do.
The Annual Report and Accounts will also be mailed to those shareholders who have elected to receive it in hard copy.
The Notice of the Company's Annual General Meeting, which is expected to be held on 19 June 2015, will be sent to shareholders in due course.
Avocet's preliminary results announcement on 28 April 2015 (which is available via the Company's website) included, in addition to the preliminary financial results for the year ended 31 December 2014, information on important events that occurred during the year and their impact on those financial results. That information, together with the information set out in the Appendix below is provided in compliance with the requirements of DTR6.3.5(2)(b). This information is not a substitute for reading the full Annual Report and Accounts for the year ended 31 December 2014.
FOR FURTHER INFORMATION PLEASE CONTACT
Avocet Mining PLC | Bell Pottinger Financial PR Consultants | J.P. Morgan Cazenove Corporate Broker |
David Cather, CEOMike Norris, FD | Daniel Thöle | Michael Wentworth-Stanley |
+44 203 709 2570 | +44 20 2772 2555 | +44 20 7742 4000
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NOTES TO EDITORS
Avocet Mining PLC ("Avocet" or the "Company") is an unhedged gold mining and exploration company listed on the London Stock Exchange (ticker: AVM.L) and the Oslo Børs (ticker: AVM.OL). The Company's principal activities are gold mining and exploration in West Africa.
In Burkina Faso the Company owns 90% of the Inata Gold Mine. The Inata Gold Mine poured its first gold in December 2009 and produced 86,037 ounces of gold in 2014. Other assets in Burkina Faso include eight exploration permits surrounding the Inata Gold Mine in the broader Bélahouro region. The most advanced of these projects is Souma, some 20 kilometres from the Inata Gold Mine.
In Guinea, Avocet owns 100% of the Tri-K Project in the north east of the country. Drilling to date has outlined a Mineral Resource of 3.0 million ounces, and in October 2013 the Company announced a maiden Ore Reserve on the oxide portion of the orebody, which is suitable for heap leaching, of 0.5 million ounces. As an alternative, the potential exists to exploit the entire 3.0 million ounce Tri-K orebody via the CIL processing method. The Company announced on 2 April 2015 that an exploitation permit had been awarded for Tri-K.
Appendix
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Avocet group (the "Group") are set out below, together with details of how these are currently mitigated. For further information on how the Group manages risk, see pages 19 to 21 of the Strategic Report within the Annual Report and Accounts.
Risk | Comment | Business Impact | Mitigation |
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Economic risks |
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Availability of finance | The Life of Mine Plan at Inata, as well as the construction of a new mine at Tri-K in Guinea, and repayment of the Elliott loans are dependent on external financing. | High | The Company has put in place cash conservation and cost reduction measures at Inata and continues performance testing with a view to improving gold recoveries. It has also commenced a programme of drilling and metallurgical test work at Souma to determine the extent to which satellite ore feed from Souma might increase Inata's life of mine and cash flow generation.
The Board believes that the activities at Tri-K and Souma should generate value for the Group and should assist the Group in its discussions regarding future financing for Tri-K and for corporate purposes including repaying loans to Elliott. The Company continues to explore options for longer term funding for the remainder of 2015 and beyond. See the disclosures on Going Concern in Note 1 to the Financial Statements for more information. |
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Exposure to a strengthening in local currency rates | Avocet realises US dollars for all of its gold sales, and reports its results in US dollars.
The Company is exposed to the West African CFA, being the local currency of Burkina Faso, in which its Ecobank loan as well as many of its costs are denominated. | Low | The Company continually monitors fluctuations in currency rates, and may on occasion purchase short term currency hedges (although did not do so in 2014). It is Avocet's policy to minimise the value of cash held in non-US dollar currencies where possible, while complying with currency restrictions and other obligations of the countries in which it operates. |
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Exposure to unfavourable movements in purchase prices of input materials | The Company is exposed, both directly and indirectly, to the purchase price of diesel, steel, and reagents used in gold production. | Moderate | The Company seeks to minimise its usage of input materials. It also monitors commodity prices constantly and considers whether hedging might be appropriate. No hedging was entered into during 2014. |
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Exposure to increases in the market prices of the equipment and services it uses | Avocet is subject to increases in the market prices for services and equipment (e.g. mining contractors, drilling, tyres, vehicles, etc). | Moderate | The Company seeks to negotiate the best possible rates for all services and products it receives, taking into account not only price, but service quality and reliability. |
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Exposure to a fall in gold prices | Avocet's revenue is dependent on the market price of gold. | High | Avocet maintains a policy of exposure to the spot gold price however continues to review whether a form of hedge might be appropriate. |
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Operational risks | ||||||
Reliability of Mineral Resources and Ore Reserves | The calculation of Mineral Resources and Ore Reserves involves significant assumptions and estimates that may prove inaccurate, including gold price assumptions. | High | Avocet's Mineral Resources and Ore Reserve estimates are prepared either by in-house staff or by third party consultants who have considerable experience and are certified by appropriate bodies such as JORC and NI43-101. The Technical Committee is responsible for ensuring the appropriate controls are in place to provide assurance that Mineral Resources and Ore Reserve estimates are appropriately prepared. | |||
Exposure to mining hazards | The Company is exposed to a number of risks and hazards typically associated with mining - e.g. pit wall failure, adverse weather, and mechanical breakdowns. | Moderate | Avocet's operational teams regularly monitor mining risks, and report to the Technical Committee, which is responsible, on behalf of the Board, for ensuring appropriate measures are in place for anticipating, and responding to, such matters. | |||
Country risks | ||||||
Exposure to changes in fiscal and regulatory regime | In addition to political/social risks, Avocet is exposed to changes in the mining, labour and tax codes in Burkina Faso and Guinea, which may result in a more challenging, or costly, operating environment. | High | Avocet is committed to acting in partnership with all stakeholders, including the governments and communities of the countries in which it operates. It regularly meets government ministers to discuss fiscal and regulatory matters and to ensure the Company and its shareholders' interests are well represented. | |||
Exposure to political and social risks in Burkina Faso and Guinea | Avocet's assets are located in Burkina Faso and in Guinea, and the Company is therefore exposed to any adverse changes in the political and social situations in those countries. | Moderate | The Board closely monitors the political and social situations in the countries in which it operates, drawing on internal and external advisors.
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Other risks |
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Finance risk | Many of Avocet's assets at Inata are secured in favour of Ecobank. The Company is therefore reliant on meeting its loan obligations with Ecobank in order to avoid the risk of this security being enforced. In addition, the Company has an unpaid obligation to Elliott, which must be repaid or renegotiated.
In addition, the Inata mine has a number of trade creditors whose balances are overdue, including critical suppliers. There is a risk that one or more of these might withhold supplies or initiate legal action, which in turn might lead to the inability of the mine to continue to operate. | High | The Company is in regular contact with all of its financiers, including Ecobank and Elliott. Although the gold price and operating performance have made meeting debt commitments difficult during 2014, Avocet recognises the support it has received from its debt providers, and continues to focus on maintaining a strong relationship of trust.
The management of the Inata mine remain in regular contact with suppliers, who have been supportive and understanding of the issues faced to date, and the difficulties going forward. The message communicated to all creditors of the mine that the continued operation of Inata will lead to the maximum repayment of outstanding debts. |
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Portfolio risk of having a single operating asset | Since the sale of Avocet's South East Asian assets, the Company has been reliant on a single revenue generating asset in Inata. Any factors that affect production at the Inata will consequently have a significant impact on Group results. | Moderate | It is the Company's policy to pursue growth opportunities through organic means (in Guinea, as well as through expansion in Burkina Faso), as well as reviewing acquisition opportunities which can be shown to be value accretive. |
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Licence administration | Avocet holds a number of exploration and mining licences. These licences normally include conditions for ongoing operation (e.g. minimum expenditure levels) and require periodic renewal. Renewals are not normally guaranteed. | Moderate | Avocet maintains good relations with the appropriate authorities and management are responsible for ensuring conditions are adhered to and renewal applications submitted in good order. |
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Litigation | Avocet is the subject of legal action initiated by its former partner in Indonesia, with regard to the sale of various South East Asia entities in 2011. | Moderate (with low probability) | As explained in note 31, the courts in Indonesia have to date accepted Avocet's claim that the Indonesian courts do not have jurisdiction over the dispute.
PT LT has appealed this ruling, but the Company is confident that all the actions taken in respect of the transaction have been in accordance with prevailing rules and regulations and there are no grounds for any such legal action. |
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Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report, the Remuneration Report, and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company and group for that period. In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements; and
· prepare financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Remuneration Report comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm that:
· so far as each Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and
· the Directors have taken all steps that they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.
The Directors are responsible for preparing the Annual Report in accordance with applicable law and regulations. Having taken advice from the Audit Committee, the Directors consider the Annual Report and the financial statements, taken as a whole, provide the information necessary to assess the Company's performance, business model and strategy and is fair, balanced and understandable.
The Directors believe that the Annual Report and accounts taken as a whole are fair, balanced and understandable, and confirm that the narrative sections of the Annual Report are consistent with the financial statements, and accurately reflect the Company's performance.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
To the best of my knowledge:
· the Group financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
· the Annual Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
David Cather
Chief Executive Officer